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entitled 'Nuclear Material: Several Potential Options for Dealing with
DOE's Depleted Uranium Tails Could Benefit the Government' which was
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Testimony:
Before the Subcommittee on Oversight and Investigations, Committee on
Energy and Commerce, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, April 3, 2008:
Nuclear Material:
Several Potential Options for Dealing with DOE's Depleted Uranium Tails
Could Benefit the Government:
Statement of Robert A. Robinson, Managing Director Natural Resources
and Environment:
GAO-08-613T:
GAO Highlights:
Highlights of GAO-08-613T, a testimony before the Subcommittee on
Oversight and Investigations, Committee on Energy and Commerce, House
of Representatives.
Why GAO Did This Study:
Since the 1940s, the Department of Energy (DOE) has been processing
natural uranium into enriched uranium, which has a higher concentration
of the isotope uranium-235 that can be used in nuclear weapons or
reactors. This has resulted in over 700,000 metric tons of leftover
depleted uranium, also known as “tails,” that have varying residual
concentrations uranium-235. The tails are stored at DOE’s uranium
enrichment plants in Portsmouth, Ohio and Paducah, Kentucky. Although
the tails have historically been considered a waste product and an
environmental liability, recently an about tenfold increase in uranium
prices may give DOE options to use some of the tails in ways that could
provide revenue to the government. GAO’s testimony is based on its
March 31, 2008, report entitled Nuclear Material: DOE Has Several
Potential Options for Dealing with Depleted Uranium Tails, Each of
Which Could Benefit the Government (GAO-08-606R). The testimony focuses
on (1) DOE’s potential options for its tails and (2) the potential
value of DOE’s tails and factors that affect the value. It also
contains an analysis of DOE’s legal authority to carry out the
potential options. In its report, GAO recommended that Congress
consider clarifying DOE’s statutory authority to manage depleted
uranium. GAO also recommended that DOE complete a comprehensive uranium
management assessment as soon as possible.
What GAO Found:
DOE’s potential options for its tails include selling the tails “as
is,” re-enriching the tails, or storing them indefinitely. DOE’s
current legal authority to sell its depleted uranium inventory “as is”
is doubtful, but DOE generally has authority to carry out the other
options. The department has not finished a comprehensive assessment of
these options and is still evaluating the details of how such options
might be implemented.
* DOE’s authority to sell the tails in their current unprocessed form
is doubtful. Because of specific statutory language in 1996 legislation
governing DOE’s disposition of its uranium, we believe that DOE’s
authority to sell the tails in unprocessed form is doubtful and that,
under rules of statutory construction, DOE likely lacks such authority.
However, if Congress were to provide the department with the needed
authority, firms such as nuclear power utilities and enrichment
companies may be interested in purchasing these tails and re-enriching
them as a source of nuclear fuel.
* DOE could contract to re-enrich the tails. Although DOE would have to
pay for re-enrichment, it might obtain more value from selling the re-
enriched uranium instead of the tails if its re-enrichment costs were
less than the discount it would have to offer to sell the tails as is.
* DOE could store the tails indefinitely. While this option conforms to
an existing DOE plan to convert tails into a more stable form for long
term storage, storing the tails indefinitely could prevent DOE from
obtaining the potentially large revenue resulting from sales at
currently high uranium prices. The potential value of DOE’s depleted
uranium tails is currently substantial, but changing market conditions
could greatly affect the tails’ value over time. Based on February 2008
uranium prices and enrichment costs and assuming sufficient re-
enrichment capacity is available, GAO estimates the value of DOE’s
tails at $7.6 billion. However, this estimate is very sensitive to
changing uranium prices, which recently have been extremely volatile,
as well as to the availability of enrichment capacity.
To view the full product, including the scope
and methodology, click on [http://www.gao.gov/cgi-bin/getrpt?GAO-08-
613T].
For more information, contact Robert A. Robinson at (202) 512-3841 or
robinsonr@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss our work on the Department of
Energy's (DOE) inventory of depleted uranium as you consider options
for using this inventory in ways that could benefit the U.S.
government. As you know, since the 1940s the government has been
processing natural uranium into enriched uranium. This increases the
concentration of the isotope uranium-235 necessary to make the material
useful in nuclear weapons or reactors. The generation of enriched
uranium over many decades has resulted in approximately 700,000 metric
tons of leftover depleted uranium, also known as "tails," that have
varying residual concentrations of uranium-235 remaining. DOE stores
these tails at its uranium enrichment plants in Portsmouth, Ohio, and
Paducah, Kentucky. DOE is faced with assessing its options to best
manage this large accumulation of tails. Although the tails have
historically been considered a waste product and an environmental
liability, an about tenfold increase in uranium prices in recent years
may give DOE options to use that portion of the tails with the higher
residual concentrations of uranium-235 in ways that could provide
revenue to the government.
My testimony today, which is based on our March 31, 2008, report to the
House Committee on Energy and Commerce and the Senate Committee on
Energy and Natural Resources,[Footnote 1] discusses (1) DOE's potential
options for beneficially reusing or indefinitely storing its tails and
(2) the potential value of DOE's tails and factors that affect the
value.
To address these objectives, we reviewed a draft uranium sales strategy
that DOE has been developing since 2005, as well as a March 2008 DOE
policy statement outlining how the department intends to manage its
inventory of uranium--including depleted, natural, and enriched
uranium. As part of our evaluation of DOE's potential options, we
reviewed relevant statutes and regulations, court decisions, and other
legal documents. We also requested DOE's position on its legal
authority to implement options for its tails, but DOE declined to
provide its position. Appendix I contains our analysis of DOE's legal
authority to sell or transfer the tails in their current form, as well
as to re-enrich and sell the tails and to store the tails indefinitely.
In addition to this legal analysis, we interviewed officials from DOE's
Office of Nuclear Energy, which is developing the strategy, and DOE's
Office of Environmental Management, which is in charge of the day-to-
day management of DOE's uranium inventories stored at Paducah and
Portsmouth. We also visited DOE's Portsmouth and Paducah Project Office
in Lexington, Kentucky, to discuss depleted uranium management issues
with DOE officials. In addition, we interviewed officials from 10 U.S.
nuclear power utilities, enrichment services companies such as USEC,
and others in the nuclear industry regarding their commercial interests
in the tails. To estimate the potential value of DOE's tails, we
developed a model using standard formulas for the amounts of enriched
uranium and tails produced from given quantities of uranium and
enrichment services. We obtained data from DOE on the quantities and
uranium-235 concentrations of tails in the department's inventory. The
model also used uranium price data obtained from nuclear industry trade
publications. These data are commonly used in the nuclear industry as
standard measures of the market price for uranium; we determined that
the data were sufficiently reliable for our purposes.
We conducted our work from July 2007 to March 2008 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
In summary, we found the following:
DOE's potential options for its tails include selling the tails "as
is," re-enriching the tails, or storing them indefinitely. However,
DOE's current legal authority to sell its depleted uranium inventory in
its current unprocessed form is doubtful, and under rules of statutory
construction, DOE likely lacks such authority. We found that DOE
generally has authority to carry out the re-enrichment and storage
options. The department has not finished a comprehensive assessment of
these options and is still evaluating the details of how such options
might be implemented.
* DOE's authority to sell the tails in their current unprocessed form
is doubtful. Because of specific statutory language in 1996 legislation
governing DOE's disposition of its uranium, we believe that DOE's
authority to sell the unprocessed tails is doubtful. DOE may only sell
or transfer uranium in a manner consistent with the provisions of the
statute. While the statute authorizes and regulates DOE's sale or
transfer of a number of types of uranium, it does not specify
conditions for the sale or transfer of depleted uranium tails.
Therefore, under rules of statutory construction, DOE likely lacks such
authority. However, if Congress were to provide the department with the
needed authority, firms such as nuclear power utilities and enrichment
companies may be interested in purchasing these tails and re-enriching
them as a source of nuclear fuel. Industry officials told us that
buyers would discount, perhaps steeply, their offered prices to make
buying tails attractive compared with purchasing natural uranium on the
open market. That is, DOE might get a discounted price for the tails to
compensate buyers for additional risks, such as rising enrichment costs
or buyers' inability to obtain sufficient enrichment services.
* DOE could contract to re-enrich the tails. Although DOE's authority
to sell the unprocessed tails is doubtful, no such general legal
impediment exists for the department to itself contract to re-enrich
the tails and sell the resulting uranium. Although DOE would have to
pay for re-enrichment, it could be better off selling the re-enriched
uranium instead of the unprocessed tails if its re-enrichment costs
were less than the discount it would have to offer to compensate a
buyer for the risks associated with arranging for re-enrichment.
* DOE could store the tails indefinitely. DOE also has the general
legal option to store the tails indefinitely. While this option
conforms to an existing DOE plan to convert tails into a more stable
form for long-term storage, storing the tails indefinitely could
prevent DOE from obtaining the potentially large revenue resulting from
sales at currently high uranium prices. It would also continue to incur
associated storage and maintenance costs that currently amount to about
$4 million per year. Moreover, after converting the tails to a more
stable form, DOE would incur higher costs to re-enrich the tails if it
decided later to pursue such an approach. This is because DOE would
have to chemically reconvert the tails to the uranium compound required
for re-enrichment.
DOE has not completed a comprehensive assessment to decide among its
sales, re-enrichment, or storage options. The department has been
developing a uranium management plan since 2005 and issued a March 2008
policy statement that established a general framework for how DOE plans
to manage its uranium inventories. However, the policy statement is not
a comprehensive assessment of the options for DOE's tails. For example,
the policy statement does not discuss whether it would be more
advantageous to sell the higher-concentration tails as is (if
authorized) or to re-enrich them, and it does not contain details on
when any potential sales or re-enrichment may occur.
The potential value of DOE's depleted uranium tails is currently
substantial, but changing market conditions could greatly affect the
tails' value over time. Based on February 2008 uranium prices and
enrichment costs and assuming sufficient re-enrichment capacity was
available, we estimate DOE's tails to have a net value of $7.6 billion.
This estimate is very sensitive to changing uranium prices, which
recently have been extremely volatile, as well as to the availability
of enrichment capacity. For example, using the lowest and highest
uranium prices over the past 8 years, our model shows the value of DOE
tails could range from almost nothing to more than $20 billion. In
addition, excess re-enrichment capacity currently is very limited, and
the amount of available re-enrichment capacity for tails over the next
decade is uncertain. Accordingly, the actual amount of revenue that DOE
could obtain from the tails could be much higher or lower than our $7.6
billion estimate, depending upon uranium prices at the time the
material is marketed and the department's ability to obtain sufficient
enrichment services, as well as the price of those services.
We recommended that Congress consider clarifying DOE's statutory
authority to manage depleted uranium, including explicit direction
about whether and how DOE may sell the tails in their current form.
Depending on the terms of such legislation, this could reap significant
benefits for the government because of the potentially large amount of
revenue that could be obtained. In any event, enacting explicit
provisions regarding DOE's disposition of depleted uranium would
provide stakeholders with welcome legal clarity and could help avoid
litigation that would interrupt DOE's efforts to obtain maximum value
for its tails. We also recommended that DOE complete a comprehensive
uranium management assessment as soon as possible to best take
advantage of recent increases in uranium prices.
In its review of our report, DOE did not comment either on our finding
that DOE's legal authority to sell or transfer depleted uranium in its
current form is doubtful or on our recommendation that Congress
consider clarifying DOE's statutory authority to manage depleted
uranium. Although DOE officials did not agree or disagree with our
recommendation that the department complete a comprehensive uranium
management assessment as soon as possible, they did request that we
clarify the recommendation to more explicitly outline what the
assessment should contain. We agreed and modified the report
accordingly.
Background:
Since the 1940s, one mission of DOE and its predecessor agencies has
been processing uranium as a source of nuclear material for defense and
commercial purposes. A key step in this process is the enrichment of
natural uranium, which increases its concentration of uranium-235, the
isotope of uranium that undergoes fission to release enormous amounts
of energy. Before it can be enriched, natural uranium must be
chemically converted into uranium hexafluoride. The enrichment process
results in two principal products: (1) enriched uranium hexafluoride,
which can be further processed for specific uses, such as nuclear
weapons or fuel for nuclear power plants; and (2) leftover "tails" of
uranium hexafluoride. These tails are also known as depleted uranium
because the material is depleted in uranium-235 compared with natural
uranium.[Footnote 2]
Since 1993, uranium enrichment activities at DOE-owned uranium
enrichment plants have been performed by USEC, formerly a wholly owned
government corporation that was privatized in 1998. However, DOE still
maintains over 700,000 metric tons of depleted uranium tails in about
63,000 metal cylinders in storage yards at its Paducah, Kentucky, and
Portsmouth, Ohio, enrichment plants. It must safely maintain these
cylinders because the tails are dangerous to human health and the
environment. Uranium hexafluoride is radioactive and forms extremely
corrosive and potentially lethal compounds if it contacts water. In
addition, DOE also maintains large inventories of natural and enriched
uranium that are also surplus to the department's needs.
Tails have historically been considered a waste product because
considerable enrichment processing is required to further extract the
remaining useful quantities of uranium-235. In the past, low uranium
prices meant that these enrichment services would cost more than the
relatively small amount of uranium-235 extracted would be worth.
However, an approximately tenfold increase in uranium prices--from
approximately $21 per kilogram of uranium in the form of uranium
hexafluoride in November 2000 to about $200 per kilogram in February
2008--has potentially made it profitable to re-enrich some tails to
further extract uranium-235. Even with the current higher uranium
prices, however, only DOE's tails with higher concentrations of uranium-
235 (at least 0.3 percent) could be profitably re-enriched, according
to industry officials. About one-third of DOE's tails contain uranium-
235 concentrations at that level or higher.
DOE Has Options for the Tails but Has Not Finished a Comprehensive
Assessment of Them:
DOE's potential options for its tails include selling the tails "as
is," re-enriching them, or storing them indefinitely. However, DOE's
legal authority to sell the tails in their current form is doubtful.
Although we found that DOE generally has authority to carry out the re-
enrichment and storage options, the department has not finished a
comprehensive assessment of these options, and it is still evaluating
the details of how such options might be implemented.
DOE's Legal Authority to Sell the Tails in Their Current Form Is
Doubtful:
While selling the tails in their current unprocessed form is a
potential option, we believe that DOE's authority to conduct such sales
is doubtful because of specific statutory language in 1996 legislation
governing DOE's disposition of its uranium. Appendix I contains our
analysis of DOE's authority to sell or transfer its depleted uranium in
its current form, as well as to re-enrich and sell the tails, and to
store the tails indefinitely. As our analysis explains, in 1996,
Congress enacted section 3112 of the USEC Privatization Act,[Footnote
3] which limits DOE's general authority, under the Atomic Energy
Act[Footnote 4] or otherwise, to sell or transfer uranium. In
particular, section 3112 explicitly bars DOE from selling or
transferring "any uranium"--including but not specifically limited to
certain forms of natural and enriched uranium--"except as consistent
with this section." Section 3112 then specifies conditions for DOE's
sale or transfer of natural and enriched uranium of various types,
including conditions in section 3112(d) for sale of natural and low-
enriched uranium from DOE's inventory. To ensure the domestic uranium
market is not flooded with large amounts of government material, in
section 3112(d), Congress required DOE to determine that any such
inventory sales will not have a material adverse impact on the domestic
uranium industry. Congress also required in section 3112(d) that DOE
determine it will receive adequate payment--at least "fair market
value"--if it sells this uranium and that DOE obtain a determination
from the President that such materials are not necessary for national
security.
Nowhere, however, does section 3112(d) or any other provision of
section 3112 explicitly provide conditions for DOE to transfer or sell
depleted uranium. Because section 3112(a) states that DOE may not
"transfer or sell any uranium . . . except as consistent with this
section," and because no other part of section 3112 sets out the
conditions for DOE to transfer or sell depleted uranium, we believe
that under rules of statutory construction, DOE likely lacks authority
to sell the tails. While courts have not addressed this question before
and thus the outcome is not free from doubt, this interpretation
applies the plain language of the statute. It also respects the policy
considerations and choices Congress made in 1996 when presented with
the disposition of DOE's valuable uranium in a crowded and price-
sensitive market. Finally, this reading of DOE's authority is
consistent with how courts address changes in circumstances after a law
is passed: Statutes written in comprehensive terms apply to
unanticipated circumstances if the new circumstances reasonably fall
within the scope of the plain language. Thus, under the current terms
of section 3112, DOE's sale of its tails would be covered by the
statute's general prohibition on sale of uranium, even if tails were
not part of the universe Congress explicitly had in mind when it
enacted the statute in 1996.
Should Congress grant DOE the needed legal authority by amending the
USEC Privatization Act or through other legislation, firms such as
nuclear power utilities and enrichment companies would be interested in
purchasing at least that portion of the tails with higher
concentrations of extractable uranium-235 as a valuable source for
nuclear fuel. Officials from 8 of 10 U.S. nuclear utilities indicated
tentative interest in such a purchase. Individual utilities were often
interested in limited quantities of DOE's tails because they were
concerned about depending upon a single source to fulfill all of their
requirements. Multiple utilities acting together as a consortium could
mitigate these concerns and purchase larger quantities of tails. Some
enrichment firms also told us of some interest in purchasing portions
of the inventory, but their anticipated excess enrichment capacity to
process the tails into a marketable form affected both the quantity of
tails they would purchase and the timing of any purchase.
Potential buyers suggested various commercial arrangements, including
purchasing the tails through a competitive sale, such as an auction, or
through negotiations with DOE. However, industry officials told us that
buyers would discount, perhaps steeply, their offered prices to make
buying tails attractive compared with purchasing natural uranium on the
open market. That is, DOE might get a discounted price for the tails to
compensate buyers for additional risks, such as rising enrichment costs
or buyers' inability to obtain sufficient enrichment services. In
addition, potential buyers noted that any purchase would depend upon
confirming certain information, such as that the tails were free of
contaminants that could cause nuclear fuel production problems and that
the cylinders containing the tails--some of which are 50 years old and
may not meet transportation standards--could be safely shipped.
DOE Could Re-enrich Its Tails:
Although DOE's legal authority to sell the tails in their current form
is doubtful, DOE has the general legal option, as discussed in appendix
I, of re-enriching the tails and then selling the resulting natural or
enriched uranium. DOE would have to contract for enrichment services
commercially because the department no longer operates enrichment
facilities itself. Furthermore, DOE would have to find a company with
excess enrichment capacity beyond its current operations, which may be
particularly difficult if large amounts of enrichment processing were
required. Within the United States today, for example, the only
operating enrichment facility is DOE's USEC-run Paducah, Kentucky,
plant, and almost all of its enrichment capacity is already being used
through 2012, when the facility may stop operating. USEC and at least
two other companies are also constructing or planning to construct new
enrichment facilities in the United States that potentially could be
used to re-enrich DOE's tails.
Although DOE would have to pay for re-enrichment, it might obtain more
value from selling the re-enriched uranium instead of the tails if its
re-enrichment costs were less than the discount it would have to offer
to sell the tails as is. Enrichment firms with whom we spoke told us
they would be interested in re-enriching the tails for a fee. The
quantity of tails they would re-enrich annually would depend on the
available excess enrichment capacity at their facilities.
Additionally, as noted above, prior to selling any natural or enriched
uranium that results from re-enriching tails, DOE would be required
under section 3112(d) of the USEC Privatization Act to determine that
sale of the material would not have a material adverse impact on the
domestic uranium industry and that the price paid to DOE would provide
at least fair market value. Section 3112(d) also would require DOE to
obtain the President's determination that the material is not needed
for national security.
DOE Could Store the Tails:
DOE also has the general legal option, as discussed in appendix I, to
store the tails indefinitely. In the late 1990s, when relatively low
uranium prices meant that tails were viewed as waste, DOE developed a
plan for the safe, long-term storage of the material. DOE is
constructing two new facilities to chemically convert its tails into a
more stable and safer uranium compound that is suitable for long-term
storage. DOE estimates that after the conversion facilities begin
operating in 2009, it will take approximately 25 years to convert its
existing tails inventory.
Storing the tails indefinitely could prevent DOE from taking advantage
of the large increase in uranium prices to obtain potentially large
amounts of revenue from material that was once viewed as waste. DOE
would also continue to incur costs associated with storing and
maintaining the cylinders containing the tails. These costs amount to
about $4 million annually. Sale (if authorized) or re-enrichment of
some of DOE's tails could also reduce the amount of tails that would
need to be converted and, thereby, save DOE some conversion costs.
Moreover, once the tails were converted into a more stable form of
uranium oxide, DOE's costs to re-enrich the tails would be higher if it
later decided to pursue this approach. This is because of the cost of
converting the uranium oxide back to uranium hexafluoride, a step that
would be required for re-enrichment. However, according to DOE
officials, after the conversion plants begin to operate, the plants
will first convert the lower concentration tails because they most
likely will not be economically worthwhile to re-enrich. This would
give DOE additional time to sell or re-enrich the more valuable higher-
concentration tails.
DOE Has Not Completed a Comprehensive Assessment of Options for Its
Tails:
DOE has been developing a plan since 2005 to sell excess uranium from
across its inventories of depleted, natural, and enriched uranium to
generate revenues for the U.S. Treasury. In March 2008, DOE issued a
policy statement that established a general framework for how DOE plans
to manage its uranium inventories. One feature of this policy statement
is the establishment of an annual cap on total uranium sales from all
of DOE's inventories. The cap is designed to minimize a material
adverse impact on domestic uranium producing companies that could
result from DOE depressing uranium prices by selling large amounts of
uranium. Thus, under this policy, the maximum amount of tails that DOE
would sell annually will depend on the amount of planned sales from its
other uranium inventories. In addition, because most uranium to be used
as fuel for U.S. nuclear power plants comes from foreign sources, DOE
may also choose to retain, rather than sell, some of its uranium as a
reserve stockpile to be used in case of a significant disruption in
world supplies.
However, the March 2008 policy statement is not a comprehensive
assessment of the sales, re-enrichment, or storage options for DOE's
tails. The policy statement lacks specific information on the types and
quantities of uranium that the department has in its inventory.
Furthermore, the policy statement does not discuss whether it would be
more advantageous to sell the higher-concentration tails as is (if
authorized) or to re-enrich them. It also does not contain details on
when any sales or re-enrichment may occur or DOE's legal authority to
carry out those options under section 3112 of the USEC Privatization
Act. It also lacks information on the uranium market conditions that
would influence any DOE decision to potentially sell or re-enrich
tails. Further, it does not analyze the impact of such a decision on
the domestic uranium industry, and it does not provide guidance on how
a decision should be altered in the event that market conditions
change. Although the policy statement states that DOE will identify
categories of tails that have the greatest potential market value and
that the department will conduct cost-benefit analyses to determine
what circumstances would justify re-enriching and/or selling
potentially valuable tails, it does not have specific milestones for
doing so. Instead, the policy statement states that this effort will
occur "in the near future."
DOE's Depleted Uranium Inventory Is Potentially Worth Billions of
Dollars, but Many Factors Could Greatly Change Its Value:
At current uranium prices, we estimate DOE's tails to have a net value
of $7.6 billion; however, we would like to emphasize that this estimate
is very sensitive to changing uranium prices, which recently have been
extremely volatile, as well as to the availability of enrichment
capacity. This estimate assumes the February 2008 published uranium
price of $200 per kilogram of natural uranium in the form of uranium
hexafluoride and $145 per separative work unit--the standard measure of
uranium enrichment services. Our model also assumes the capacity to re-
enrich the higher-concentration tails and subtracts the costs of the
needed enrichment services. It also takes into account the cost savings
DOE would realize from reductions in the amount of tails that needed
conversion to a more stable form for storage, as well as the costs to
convert any residual tails.
As noted above, this estimate is very sensitive to price variations for
uranium as well as to the availability of enrichment services. Uranium
prices are very volatile, and a sharp rise or fall in prices could
greatly affect the value of the tails. For example, since 2000, uranium
prices have varied from a low of about $21 per kilogram in November
2000 to a high of about $360 per kilogram in mid-2007, before falling
to their recent level of about $200 per kilogram. Substituting the high
and low end of historical uranium prices over the past 8 years for
current prices results in a range of values for the tails from being
nearly worthless, assuming $21 per kilogram of uranium, to over $20
billion, assuming $360 per kilogram of uranium. There is no consensus
among industry players whether uranium prices will fall or rise in the
future or on the magnitude of any future price changes. Furthermore,
the introduction of additional uranium onto the market by the sale of
large quantities of DOE depleted, natural, or enriched uranium--
assuming DOE obtains authority to sell depleted uranium--could also
lead to lower uranium prices. Therefore, according to DOE officials,
DOE's uranium sales strategy, when completed, will likely call for
limits on the quantity of uranium the department would sell annually to
help achieve DOE's goal of minimizing the negative effects on domestic
uranium producers. However, this would lengthen the time necessary to
market DOE's uranium, increasing the time the department is exposed to
uranium price volatility. These factors all result in great uncertainty
of the valuation of DOE's tails.
In addition, the enrichment capacity available for re-enriching tails
may be limited, and the costs of these enrichment services are
uncertain. For example, USEC currently only has a small amount of
excess enrichment capacity at its Paducah plant. If it used the spare
capacity, USEC would only be able to re-enrich about 14 percent of
DOE's most economically attractive tails between now and the possible
closing of the plant in 2012. Although USEC officials told us the
company was willing to explore options to extend the Paducah plant's
operations beyond 2012 and dedicate Paducah's capacity solely to re-
enriching DOE's tails after this point, negotiations between the
company and DOE would be needed to determine the enrichment costs that
would be paid by DOE. The Paducah plant uses a technology developed in
the 1940s that results in relatively high production costs. Even if the
Paducah plant were to be dedicated entirely to re-enriching DOE tails
after 2012, over a decade would be required to complete the work
because of limitations on the annual volume of tails that can be
physically processed by the plant. This lengthy period of time would
expose DOE to risks of uranium price fluctuations and increasing
maintenance costs.
USEC and other companies are constructing or planning to construct
enrichment plants in the United States that utilize newer, lower-cost
technology. However, these facilities are not expected to be completed
until various times over the next decade. It is unclear exactly when
these facilities will be fully operating, the extent to which they will
have excess enrichment capacity to re-enrich DOE's tails, and what
enrichment costs DOE could expect to pay. For example, the size of the
fee DOE may have to pay an enrichment company to re-enrich its tails
would be subject to negotiation between DOE and the company.
Conclusions:
Recent dramatic increases in uranium prices present the U.S. government
with an opportunity to gain some benefit from material that was once
considered a liability. Under current law, however, one potential
avenue for dealing with DOE's depleted uranium tails--sale of the
material in its current form--is likely closed to the department.
Obtaining legal authority from Congress to sell depleted uranium under
USEC Privatization Act section 3112 or other legislation would provide
the department with an additional option in determining the best course
of action to obtain the maximum financial benefit from its tails. We
therefore recommended that Congress consider clarifying DOE's statutory
authority to manage depleted uranium, under the USEC Privatization Act
or other legislation, including explicit direction about whether and
how DOE may sell or transfer the tails. Depending on the terms of such
legislation, this could reap significant benefits for the government
because of the potentially large amount of revenue that could be
obtained. In any event, enacting explicit provisions regarding DOE's
disposition of depleted uranium would provide stakeholders with welcome
legal clarity and help avoid litigation that could interrupt DOE's
efforts to obtain maximum value for the tails.
Unfortunately, DOE has not completed a comprehensive assessment of its
options with sufficient speed to take advantage of current market
conditions. Despite working since 2005 to develop a plan for its
uranium inventories, DOE's March 2008 policy statement on the
management of its excess uranium inventories lacks detailed information
on the types and amounts of uranium that the department plans to
potentially sell, further enrich, or store. Although pledging to
conduct appropriate cost-benefit analyses as well as analyses on the
impact of any proposal on the domestic uranium industry, the policy
statement lacks specific milestones for doing so. Because of the
potentially significant amounts of revenue that could be obtained from
DOE's uranium inventories and the extreme volatility of the uranium
market, we recommended that the department complete, as soon as
possible, a comprehensive uranium management assessment that details
DOE's options, its authority to implement these options, and the impact
of these options on the domestic uranium industry. Without such an
assessment that contains detailed information on each of its options,
DOE will be unable to quickly react to rapidly changing market
conditions to achieve the greatest possible value from its uranium
inventories.
Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions that you or other Members of the Subcommittee
may have at this time.
GAO Contact and Staff Acknowledgments:
If you have any questions or need additional information, please
contact Robert A. Robinson at (202) 512-3841 or robinsonr@gao.gov.
Major contributors to this statement were Ryan T. Coles (Assistant
Director), Ellen Chu, Terry Hanford, Karen Keegan, Omari Norman, Susan
Sawtelle, and Franklyn Yao.
[End of section]
Appendix I: GAO's Legal Analysis of DOE's Current Authority to Manage
Depleted Uranium:
Introduction and Summary of Conclusions:
As part of the Government Accountability Office's review of the
Department of Energy's (DOE) potential options for managing its
inventory of excess depleted uranium (also known as "tails"), we
examined DOE's legal authority to implement three basic options: (1) re-
enriching the tails and then selling or transferring them, (2) storing
the un-enriched tails indefinitely, and (3) selling or transferring the
inventory of tails "as is."
We conclude that DOE has general authority under the Atomic Energy Act
to carry out the first and second options--to re-enrich and then sell
or transfer the tails, as well as to store them indefinitely. However,
we believe that because of constraints on DOE's Atomic Energy Act
authority in the USEC Privatization Act, the department's authority to
carry out the third option--to sell or transfer the tails in their
current form--is doubtful. We believe that under rules of statutory
construction, DOE likely lacks such authority under current law.
Because this is an issue of first impression, and because the question
could significantly affect the public interest and DOE's development of
a comprehensive strategy for its excess-uranium inventory, we recommend
that Congress consider enacting legislation clarifying the conditions
(if any) under which DOE may sell or transfer its depleted uranium.
Depending on the terms of such legislation, this could reap benefits
for the government because of the potentially significant revenue that
could be obtained. In any event, such clarification would provide
stakeholders with welcome legal clarity, potentially enhance the
attractiveness to interested purchasers, and help avoid litigation that
could interrupt DOE's efforts to obtain maximum value for the
public.[Footnote 5]
Analysis[Footnote 6]
A. DOE authority to re-enrich and sell or transfer the tails:
DOE has general authority under the Atomic Energy Act of 1954, as
amended, 42 U.S.C. § 2011 et seq. (AEA), to re-enrich its depleted
uranium inventory to natural or low-enriched levels and then to sell or
transfer the re-enriched product. First, AEA section 41, 42 U.S.C. §
2061, authorizes DOE to re-enrich depleted uranium to low-enriched
levels, and AEA sections 63 and 66, 42 U.S.C. §§ 2093, 2096--which
authorize DOE's acquisition and distribution of source material--
implicitly authorize DOE to re-enrich depleted uranium to natural
levels. Second, AEA sections 53, 63, and 161m, 42 U.S.C. §§ 2073, 2093,
2201(m), authorize DOE to transfer this re-enriched uranium, subject to
certain conditions, to appropriately licensed entities such as nuclear
power reactor operators.
This general AEA authority is limited by any applicable restrictions in
the USEC Privatization Act, enacted in 1996. Section 3112(a) of the
act, 42 U.S.C. §§ 2297h-10(a), prohibits DOE from transferring or
selling "any uranium (including natural uranium concentrates, natural
uranium hexafluoride, or enriched uranium in any form) . . . except as
consistent with this section." The remaining provisions of section 3112
then specify the conditions under which DOE may sell or transfer
various types of natural and enriched uranium. Thus, DOE is authorized
to sell or transfer re-enriched depleted uranium provided such
transactions satisfy the remaining section 3112 conditions.
B. DOE authority to store the un-enriched tails indefinitely:
DOE has general authority under the AEA to store its unenriched
depleted uranium indefinitely, as well as to convert the tails to a
more stable form for storage. We believe this authority is implicit
under AEA sections 63 and 66, which, as discussed above, authorize DOE
to acquire and distribute source material. This authority is also
implicit under AEA section 41, which authorizes DOE to enrich uranium,
a process which inevitably generates depleted uranium. In addition, to
the extent the department's depleted uranium is "hazardous waste," AEA
section 91a(3), 42 U.S.C. § 2121(a)(3), explicitly authorizes DOE to
store, process, transport, and dispose of "hazardous waste (including
radioactive waste) resulting from nuclear materials production, weapons
production and surveillance programs, and naval nuclear propulsion
programs."
Again, this AEA authority is limited by any applicable restrictions in
the USEC Privatization Act. Section 3112 of that act does not apply to,
and thus does not restrict, storage of DOE's uranium. Section 3113, 42
U.S.C. § 2297h-11, does not apply to or restrict storage of its own
depleted uranium, but it is relevant in that it reinforces DOE's
authority to store this type of uranium under the AEA. Section 3113(a)
requires DOE to accept depleted uranium from other entities for storage
and disposal in the event the depleted uranium is determined to be "low-
level radioactive waste." If the waste generator is a Nuclear
Regulatory Commission (NRC) licensee, DOE must take title and
possession of the depleted uranium "at an existing DUF6 [depleted
uranium] storage facility." Implicit in these provisions is that DOE
may store and dispose of its own depleted uranium waste as well, under
its AEA or other authority.
C. DOE authority to sell or transfer the tails in their current form:
DOE has general authority under the AEA to sell or transfer depleted
uranium in its current form. As noted, sections 63 and 161m authorize
DOE to distribute or sell "source material" to appropriately licensed
entities, provided certain conditions are met, and depleted uranium is
"source material." AEA section 11z, 42 U.S.C. § 2014(z).
Again, this AEA authority is limited by any applicable restrictions in
the USEC Privatization Act. While this is an issue of first impression,
we believe DOE's authority to sell or transfer depleted uranium in its
current form is doubtful. We believe courts applying rules of statutory
construction would likely find DOE lacks such authority under current
law.
As noted above, section 3112 of the USEC Privatization Act, entitled
"Uranium transfers and sales," begins with a broad prohibition:
"[DOE] shall not . . . transfer or sell any uranium (including natural
uranium concentrates, natural uranium hexafluoride, or enriched uranium
in any form) to any person except as consistent with this section."
(Emphasis added.) The remainder of section 3112 then prescribes the
conditions under which DOE may sell or transfer particular types of
uranium, namely, so-called Russian-origin uranium (subsection (b));
natural and enriched uranium transferred to USEC (subsection (c));
natural and low-enriched uranium sold from DOE's inventory (subsection
(d)); and enriched uranium transferred to federal agencies, state and
local agencies, nonprofit, charitable or educational institutions, and
others (subsection (e)). No provision explicitly addresses depleted
uranium.
Read naturally and in accordance with its plain language, section 3112
prohibits DOE from selling or transferring its depleted uranium. The
tails consist of uranium-235 and uranium-238, whether they are deemed a
waste or a valuable commodity, and a DOE Office of Environmental
Management official confirmed to us that operationally, the department
treats depleted, natural, and enriched uranium all as "uranium." Thus,
depleted uranium would be covered by section 3112 as a type of "any
uranium."[Footnote 7] This plain meaning is reinforced by the fact that
section 3112(a) lists nonexclusive examples of uranium--"any uranium
(including natural uranium . . . or enriched uranium in any form)"--
making clear that additional types of uranium are covered by section
3112. A 2005 DOE internal legal memorandum (2005 DOE Memorandum)
reaches the same conclusion.[Footnote 8] Thus, because DOE may sell or
transfer uranium only as consistent with the terms of sections 3112(b)-
3112(e), and because none of those provisions specifies conditions
under which depleted uranium may be sold, the plain words of the
statute prohibit it.
The statutory structure and legislative history support this
conclusion. It is clear that when Congress passed the USEC
Privatization Act in 1996, it was familiar with depleted uranium as a
category of uranium requiring management. Because depleted uranium was
only considered as a valueless waste at that time, Congress only
explicitly referred to one management option in the statute:
disposal.[Footnote 9] As noted, in section 3113, Congress required DOE
to take responsibility for disposal of other entities' depleted
uranium, should it ever be determined to be a "low-level radioactive
waste." As NRC noted recently in making such a determination, however,
when depleted uranium is treated as a "resource," rather than a waste,
section 3113 does not apply. See NRC, In re Louisiana Energy Services,
L.P. (National Enrichment Facility), No. CLI-05-05 (Jan. 18, 2005), at
1, 3, 15, 17. In that event--where depleted uranium is a resource to be
sold or transferred--section 3112, by its terms, would apply. The fact
that Congress did not specify section 3112 conditions under which
depleted uranium may be sold, as it did for DOE's other valuable
uranium, reflects only that depleted uranium was not deemed valuable in
1996. It does not reflect congressional intent that valuable depleted
uranium is not subject to section 3112's general prohibition against
sales of "any uranium." While this result may appear anomalous because
depleted uranium is now considered a potentially highly valuable
commodity and a potential source of revenue for the federal government,
that is a matter for Congress to remedy, if it so chooses.
A recently issued DOE policy on disposition of its excess uranium
inventory recognizes this increase in value for depleted
uranium.[Footnote 10] To take advantage of this development, department
officials suggested to us that they would be authorized to sell the
tails in their current form using DOE's general AEA section 161m
authority, without regard to the prohibitions in the USEC Privatization
Act. They suggested such an approach might be reconciled as "consistent
with" section 3112, as section 3112(a) requires, because none of the
provisions in section 3112 specifies conditions of sale for depleted
uranium. The 2005 DOE Memorandum makes a similar argument, pointing to
the fact that the legislative history contains no explicit mention of
restricting DOE's existing AEA authority to sell depleted
uranium.[Footnote 11]
We disagree with this interpretation. DOE in effect reads a depleted
uranium exception into the unqualified term "any uranium," and rewrites
section 3112 to say that only sale and transfer of uranium categories
explicitly identified in that section are restricted. That is not what
the statute says, and this reading would violate the principle that
statutory exceptions are to be narrowly construed. See, e.g.,
Commissioner v. Clark, 489 U.S. 726, 738-39 (1989) ("Given that
Congress has enacted a general rule . . ., we should not eviscerate
that legislative judgment through an expansive reading of a somewhat
ambiguous exception."). Nor does the legislative history support this
result. The fact that there was no mention of limiting DOE's existing
depleted uranium sales authority under the AEA is unremarkable, because
in 1996, there was no valuable depleted uranium to sell.
Finally, it would not be consistent with section 3112 to allow DOE to
sell depleted uranium under the AEA. It would violate the statute's
prohibition against sales of "any uranium," because there are no
section 3112 exceptions under which its sale is permitted. It would
also be incongruous to allow DOE to sell or transfer potentially
billions of dollars' worth of federal assets without the scrutiny
Congress gave to disposition of DOE's valuable uranium in enacting
section 3112. Section 3112 represents Congress' more specific and later-
enacted intent regarding the types of factors to be considered in
selling DOE's uranium inventories, including price, protection of the
domestic uranium industry, and safeguarding the national security, and
therefore takes precedence. See, e.g., Smith v. Robinson, 468 U.S. 992
(1984) (more specific and recent statute takes precedence).[Footnote
12]
In sum, we believe our reading of section 3112 carries out the plain
words of the act and respects the policy considerations and choices
Congress made in 1996 when presented with the disposition of DOE's
valuable uranium in a crowded and price-sensitive market. Our reading
is also consistent with how courts interpret broad statutes when
circumstances change: laws written in comprehensive terms apply to
unanticipated circumstances if they reasonably fall within the scope of
the plain language. See, e.g., Unexcelled Chemical Corp. v. United
States, 345 U.S. 59 (1953). Thus, depleted uranium sales are covered by
the prohibition in section 3112, even if depleted uranium was not part
of the universe Congress explicitly had in mind when it enacted the
statute in 1996.
The same concerns that led Congress to legislate explicit conditions of
sale for DOE's other uranium inventories in 1996 may apply equally with
regard to sale of its depleted uranium inventory today. Congress now
has the opportunity to address the intervening increase in uranium
values and balance the competing concerns associated with its sale.
Because the question of DOE's authority to sell its depleted tails
would be a statutory construction issue of first impression and thus is
not free from doubt, and because the question is an issue of
significant public interest and importance, we recommend that Congress
consider enacting legislation setting forth the explicit conditions (if
any) under which DOE may sell or transfer its depleted uranium.
Depending on the terms of such legislation, this could reap significant
benefits for the government because of the potentially significant
revenue that could be obtained. In any event, enacting explicit
provisions regarding DOE's sale or transfer of its depleted uranium
would provide stakeholders with welcome legal clarity and help avoid
litigation that could interrupt DOE's efforts to obtain maximum value
for the public.
Conclusion:
In summary, we conclude that DOE has general authority under the Atomic
Energy Act to re-enrich and then sell or transfer the tails, provided
the transaction meets the conditions of section 3112 of the USEC
Privatization Act. DOE also has general AEA authority to store the
tails indefinitely. However, we believe that because of constraints on
DOE's AEA authority in the USEC Privatization Act, the department's
authority to sell or transfer tails in their current form is doubtful
and that under rules of statutory construction, DOE likely lacks such
authority under current law. We recommend that Congress consider
enacting legislation explicitly addressing the scope of DOE's authority
to sell and transfer depleted uranium.
Footnotes:
[1] GAO, Nuclear Material: DOE Has Several Potential Options for
Dealing with Depleted Uranium Tails, Each of Which Could Benefit the
Government, GAO-08-606R (Washington, D.C.: Mar. 31, 2008).
[2] Uranium is categorized by concentration of uranium-235, expressed
as a percentage "assay." Natural uranium has an assay of about 0.7
percent uranium-235. For use in a nuclear reactor or weapon, natural
uranium must be enriched to increase its assay to a level required for
its ultimate use. For example, low enriched uranium (LEU), which is
used in commercial nuclear power reactors, typically has an assay of
between 3 and 5 percent uranium-235. Highly enriched uranium (HEU),
which is used in nuclear weapons, has an assay of greater than 20
percent uranium-235 and can have an assay of greater than 90 percent.
The depleted uranium tails also have varying assays below the 0.7
percent assay of natural uranium. The assay of DOE's tails range from
less than 0.15 to about 0.66 percent uranium-235.
[3] USEC Privatization Act, Pub. L. No. 104-134, § 3112, 110 Stat.
1321- 344, 42 U.S.C. § 2297h-10.
[4] Atomic Energy Act of 1954, as amended, 42 U.S.C. §§ 2011 et seq.
[5] We also examined whether DOE is authorized to sell or transfer its
depleted uranium tails under section 314 of the 2006 Energy and Water
Development Appropriations Act, Pub. L. No. 109-103, 119 Stat. 2247,
2281 (Nov. 19, 2005), a position advanced to us by USEC. That provision
states in part: "Sales Of Uranium.--(A) In General.--Notwithstanding
any other provision of Federal law, including section 3112 of the USEC
Privatization Act . . . and section 3302 of title 31, United States
Code, [DOE] is authorized to barter, transfer or sell uranium
(including natural uranium concentrates, natural uranium hexafluoride,
or in any form or assay) and to use any proceeds, without fiscal year
limitation, to remediate uranium inventories held by [DOE]."
Without expressing a view on whether these terms might otherwise
authorize DOE's sale of its uranium inventories, we conclude that this
provision is not permanent legislation and thus not a continuing source
of authority, as USEC has suggested. DOE officials told us they agree
with this conclusion. Generally, provisions of an annual appropriations
act are considered temporary unless Congress indicates otherwise. B-
309704, Aug. 28, 2007. The question is whether section 314 contains
words of futurity indicating that Congress intended the provision to be
permanent. It does not. The language "notwithstanding any other
provision of law" refers to other provisions of law in effect during
the fiscal year covered by the appropriations act. The language
"without fiscal year limitation" authorizes DOE to obligate without
fiscal year limitation any proceeds from uranium sold during the period
section 314 was in effect. Because section 314 contained no words of
futurity, it is no longer in effect. Thus, whatever the scope of
authority in section 314, it does not authorize future DOE sales or
transfers.
[6] GAO's practice when rendering legal opinions regarding agency-
related matters is to solicit the agency's position on the subject
matter of the request. GAO, Procedures and Practices for Legal
Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept. 5,
2006), available at [hyperlink, http://www.gao.gov/legal/cgdecisions-
faq.html] (last visited March 20, 2008). We requested DOE's position on
its authority to manage depleted uranium under the Atomic Energy Act
and the USEC Privatization Act, as well as any related documents.
Letters from Susan D. Sawtelle, GAO Managing Associate General Counsel,
to David R. Hill, DOE General Counsel, December 10, 2007, and to Eric
J. Fygi, DOE Deputy General Counsel, January 11, 2008. DOE declined to
provide its position on these issues. Letter from Eric J. Fygi to Susan
D. Sawtelle, December 21, 2007. The department subsequently provided
certain documents, Letter from Eric J. Fygi to Susan D. Sawtelle,
January 25, 2008, but later told us these did not necessarily reflect
the department's legal position.
[7] See, e.g., Walters v. Metropolitan Educational Enterprises, Inc.,
519 U.S. 202 (1997) (it is a fundamental principle of statutory
construction that words in a statute must be given their ordinary or
natural meaning whenever possible); Ali v. Federal Bureau of Prisons,
128 S. Ct. 831 (U.S. Jan. 22, 2008) ("[R]ead naturally, the word 'any'
has an expansive meaning that is, 'one or some indiscriminately of
whatever kind.'").
[8] The 2005 DOE Memorandum (which DOE indicated may not represent its
legal position) states, "it is relatively clear that [section 3112(a)]
is applicable to depleted uranium given that it states 'any uranium.'
The examples of types of uranium are merely a listing and should not be
interpreted as a limitation to the broader phrase, 'any uranium.'"
[9] See generally Hearing before the Committee on Energy and Natural
Resources on S. 755, a Bill to Amend the Atomic Energy Act of 1954 to
Provide for the Privatization of the United States Enrichment
Corporation, S. Hrg. No. 104-105, at 5, 9 (June 13, 1995).
[10] Secretary of Energy's Policy Statement on Management of the
Department of Energy's Excess Uranium Inventory, March 11, 2008,
available at [hyperlink,
http://www.ne.doe.gov/newsroom/2008PRs/nePR031208.html] (last visited
March 20, 2008) (2008 DOE Policy Statement), at 4.
[11] The 2008 DOE Policy Statement similarly asserts that DOE has
"broad authority" under the AEA to "loan, sell, transfer or otherwise
utilize" the department's depleted, natural and enriched uranium
inventories, and that "[i]n exercising this authority, the Department
must act consistently with other relevant statutory provisions, such as
section 3112 . . . which imposes limitations on certain specified
transactions." Id. at 1 (emphasis added).
[12] Section 3112(d) of the USEC Privatization Act authorizes DOE's
sale of its natural and low-enriched uranium inventories only if it
receives "not . . . less than fair market value," determines that the
domestic uranium mining, conversion, and enrichment industry will not
suffer adverse material impact from the sale, and obtains a
determination by the President that the material is not needed for
national security. By contrast, AEA section 161m authorizes sale of
DOE's depleted uranium inventory to NRC licensees if there is
"reasonable compensation to the government."
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